Brad and Jen were married for seven years. During this time they had two children and Brad incurred substantial debts. After a long and contentious divorce proceeding, Jen was awarded custody of the two children, and in the few years since the divorce she has managed to save up a small amount of assets. If she passes away, she wishes to have these assets available to her children for college expenses and, if possible, as a small inheritance. She is concerned that if she dies and the children are still minors, Brad will inherit her money. Even if she were to name the children as beneficiaries on her accounts and assets, or disinherit Brad under a will, Brad would still likely be given control of the money she leaves to the minor children, and he may squander the assets.
Jen was referred to our office and after discussing her concerns, we set up a revocable trust for her. The trust provided that upon Jen’s death all assets would be held in trust for her two children. If the children are over the age of 25 years old upon her death, the assets will be split equally and distributed outright. If the children are under the age of 25 years old at the time of her death, the money will be held in trust for their benefit.
The trust provided that the assets allocated to the two children could be paid out to them at the discretion of the trustee for their health, education, and/or welfare. This means that the trustee selected by Jen could pass along some of the assets directly to the children if they needed money for education and/or living expenses. In addition, the trustee could directly pay for tuition or rent on behalf of the children.
Jen named her sister as trustee of the trust and instructed her about her wishes for the children if she were to pass away before they were to reach the age of majority. Brad was disinherited under the trust document and Jen also prepared a nomination of guardian nominating her sister as guardian of her two children should she die before the children reach the age of 18 years old. While the courts would probably name Brad as guardian of the children, the sister is named in the event Brad were to become incapacitated or die, or in the event he otherwise proved himself to the court to be unfit. In any case, he will not have access to the trust assets, and will not be able to spend Jen’s hard earned savings.
This will preserve the estate for the children. Since the trust is revocable, if all goes well and the Jen survives past the children reaching the age of 25 years old, she could amend the trust to name one or both of the children as trustees of the trust and make the adult children the direct beneficiaries of the trust.